EU Unable to Neutralize US Sanctions against Iran

"Anyone doing business with Iran will NOT be doing business with the United States." — US President Donald J. Trump.

"The EU is demanding that its largest corporations risk the entire cake for a few more crumbs." — Samuel Jackisch, Brussels correspondent for German public broadcaster ARD.

"The fines are in the multibillions these days so it's just not worth the risk for a small piece of business and maybe pleasing a European government." — Investment banker quoted by Reuters.

The European Union has announced a new regulation aimed at shielding European companies from the impact of US sanctions on Iran. The measure, which has been greeted with skepticism by the European business media, is unlikely to succeed: it expects European companies to risk their business interests in the US market for interests in the much smaller Iranian market.

The so-called "Blocking Statute" entered into effect on August 7, the same day that the first round of US sanctions on Iran officially snapped back into place. Those sanctions target Iran's purchases of US dollars — the main currency for international financial transactions and oil purchases — as well as the auto, civil aviation, coal, industrial software and metals sectors. A second, much stronger round of sanctions targeting Iran's oil exports, takes effect on November 5.

The action follows up on President Donald J. Trump's decision on May 8 to withdraw from the 2015 Joint Comprehensive Plan of Action (JCPOA, also known as the Iran Nuclear Deal) negotiated by the Obama administration, which lifted sanctions on Iran in exchange for a freeze on its nuclear program.

The Trump administration said that the deal negotiated by the Obama administration did not go far enough to curtail Iran's nuclear weapons program, or its ballistic missile program, or its malign behavior in the Middle East and elsewhere.

The reimposed US sanctions apply not only to American citizens and companies, but also to non-American individuals and companies. In a legal concept known as extraterritoriality, any company based outside of the United States must comply with American sanctions if it uses dollars for its transactions, has a subsidiary in America or is controlled by Americans.

"The United States is fully committed to enforcing all of our sanctions, and we will work closely with nations conducting business with Iran to ensure complete compliance. Individuals or entities that fail to wind down activities with Iran risk severe consequences."

"The Iran sanctions have officially been cast. These are the most biting sanctions ever imposed, and in November they ratchet up to yet another level. Anyone doing business with Iran will NOT be doing business with the United States."

In a joint statement, EU foreign policy chief Federica Mogherini and the foreign ministers of France, Germany and the UK openly admitted that for the EU the Iran deal is all about money and vowed to protect European companies from US penalties:

"We are determined to protect European economic operators engaged in legitimate business with Iran, in accordance with EU law and with UN Security Council resolution 2231. This is why the European Union's updated Blocking Statute enters into force on 7 August to protect EU companies doing legitimate business with Iran from the impact of US extra-territorial sanctions.

"The remaining parties to the JCPOA have committed to work on, inter alia, the preservation and maintenance of effective financial channels with Iran, and the continuation of Iran's export of oil and gas. On these, as on other topics, our work continues, including with third countries [China and Russia] interested in supporting the JCPOA and maintaining economic relations with Iran."

In a joint statement, EU foreign policy chief Federica Mogherini (pictured) and the foreign ministers of France, Germany and the UK openly admitted that for the EU the Iran nuclear deal is all about money and vowed to protect European companies from US penalties. (Photo by Dean Mouhtaropoulos/Getty Images)

The Blocking Statute, originally adopted by the EU in 1996 to help European companies avoid US sanctions on Cuba, was updated in June 2018 to include sanctions the US is re-imposing on Iran. The document, riddled with EU jargon, states:

"The Blocking Statute allows EU [economic] operators to recover damages arising from the extra-territorial sanctions within its scope from the persons causing them and nullifies the effect in the EU of any foreign court rulings based on them. It also forbids EU persons from complying with those sanctions, unless exceptionally authorized to do so by the [European] Commission in case non-compliance seriously damages their interests or the interests of the Union."

In other words, the EU is prohibiting EU citizens and companies from complying with US sanctions and is authorizing EU companies hit by US sanctions to sue the US government for compensation in European courts.

In addition, European companies that do pull out of Iran without approval from the European Commission face the threat of being sued by EU member states.

Many European commentators said the EU scheme would be unworkable, especially for European multinational corporations with business interests in the United States.

"Diplomats and lawyers have raised serious doubts about the EU's ability to protect European businesses operating in Iran from the US measures.

"The blocking statute, first drawn up in 1996, has rarely been tested. One senior EU official said there was little legal precedent for judges in EU member states to reclaim damages from third countries like the US if sued by companies."

In France, Le Figarowrote that European Commission's response to US sanctions was "hasty" and amounted to a "political gesture."

Le Mondedescribed the EU's measure as a "political signal for the Iranian regime, which demanded signs of European commitment to defend the JCPOA."

L'Expressnoted: "If a company is active in the big US market and the small Iranian market, then it does not benefit much from the fact that its activities are protected in Europe and Iran but not in the United States."

Radio France Internationale (RFI), a French public radio service, said that the effects of the Blocking Statute would be "more symbolic than economic." It added:

"The law would be more effective for Small and Medium-sized Enterprises (SMEs) doing business in Iran. For large corporations, the solution lies in negotiating waivers or exemptions with the United States. But such requests from France, Germany and the United Kingdom have already been rejected by Washington."

"Suffice to say that the implementation of this blocking law remains very hypothetical, as it goes into uncertain legal territories.

"Companies investing in Iran do not seem to believe much in the effectiveness of the regulation. The oil group Total, the ship-owner Maersk or the automaker Peugeot have already decided to leave. German group Daimler announced its withdrawal from Iran yesterday. These groups are more afraid of the US's ability to implement sanctions than the EU's wrath."

In Germany, the public broadcaster ARD published an opinion article by Brussels correspondent Samuel Jackisch titled, "Well Roared, Paper Tiger — EU Defenseless against US Sanctions." He said that the EU's new policy was "logical, but largely meaningless," and an attempt by EU foreign policy chief Federica Mogherini to "defend her political legacy." He added:

"The EU can try to turn the tables on transatlantic relations, but in the end the US still comes out on top.

"The German export industry's business with Iran may not be small at around three billion euros. However, the bottom line is that the same companies export 35 times as much to the USA. The EU is demanding that its largest corporations risk the entire cake for a few more crumbs."

"The peculiar construction of the EU Blocking Statute remains: Ordinarily, regulations and laws prohibit something. For example, an anti-dumping law prohibits companies from price dumping in order to force competitors out of the market. But the EU Blocking Statute is a call to action: Do trade with Iran and do not let threats from the US president dissuade you!

The newspaper Westdeutsche Allgemeine Zeitung quoted the Chief Executive of the German Chamber of Industry and Commerce (DIHK), Martin von Wansleben, who described the EU's measure as a "helpless political reaction." He said that its purpose was to show that the EU does not bow to US sanctions. For individual companies, he said, the blocking regulation has "no relevance."

"The Blocking Regulation is not an effective antidote to US sanctions, as the historical example suggests.... Although Washington should refrain from extraterritorial sanctions, the US market is too important for corporations to expose themselves."

"Due to the US sanctions against Iran, German industry will not touch Iran. If you realize that German industry is doing a hundredfold business in America, you will not do business with Iran, because then sanctions against German companies will exist. Therefore, Iran is certainly going to bleed very heavily at the moment."

"Some experts say the EU's moves are unlikely to have the desired effect, arguing that the blocking statute would create legal burdens for Europe-based companies without preventing the US from targeting their American branches and assets. For many companies, the risk of being cut off from business in the US — a far bigger market than Iran — is enough to make them want to comply with Washington's demands."

"It would be suicide to do any new business or funding for Iran or Iran-related companies without explicit guarantees from the US government. They have us by the throat because so much business is conducted and cleared in dollars. The fines are in the multibillions these days so it's just not worth the risk for a small piece of business and maybe pleasing a European government."

As if to prove the point, moments before US sanctions against Iran entered into force, Daimler, the German car and truck manufacturer, dropped plans to expand its Iran business. "We have ceased our already restricted activities in Iran in accordance with the applicable sanctions," Daimler said in a statement.

Comment on this item

28 Reader Comments

As a EU citizen I must apologise for the idiotic behaviour of EU leaders. What is good, more and more people here in Europe are getting angry at them. EU must be dissolved, the earlier, the better.

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Bill • Aug 9, 2018 at 08:19

More clear evidence that the EU is a globalist, ISLAMIST, monster.

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Marek Eyal • Aug 8, 2018 at 17:11

EU leaders are mad as the mad hatter. Most apparent symptoms is its apparent inability to differentiate between friends and foes and between centuries long alliance based on shared culture and human values and new "friends" in Middle East, Maghreb and Asia.

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JB Silver • Aug 8, 2018 at 16:06

G-D Bless US Pres. Donald Trump!
Again.

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Malcolm • Aug 8, 2018 at 14:47

This article is brilliant. Besides the impeccable analysis, the author has collected an imposing roster of testimonies from all across Europe.

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J. Lopey • Aug 8, 2018 at 14:02

1. The leftist EU is demonstrating why the US should not follow their Iranian anti-US Iranian policy.2. Obama gave too much away in the Iranian nuke deal and it is obvious that the EU is trying to save face, despite the fact that the Iranian government continues to remain hostile the US and the West in general.3. Prior to 9/11 Iranian financed Hezbollah killed more Americans than any other terror group.4. Iran and its paid proxies continue to march all over the Middle East unabated. They continue to fund terrorism worldwide yet the EU wants to shun the US and side with Iran?? Give me a break.5. The EU should side with its ally (US) and once and for all put an end to the draconian and radical regime of the Ayatollahs in Iran.6. Another thing: where is the outrage against Iran for its frequent statements threatening to destroy Israel within 25 years? Where is the outrage when Hezbollah operatives were caught trafficking cocaine worldwide? Where is the outrage for the 900+ Iranian citizens who were executed last year?
7. The EU needs to do the right thing and side with the US but it won't. I lived in Europe for 3 years and it is a shell of its former self. Thank God we have great allies in Eastern Europe.

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UNCLE VLADDI • Aug 8, 2018 at 12:32

Maybe it's true after all - you "can't fix stupid!"

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Bisley • Aug 8, 2018 at 11:53

The EU leadership are trying to show that they are a power in the world, and not subject to the influence of US policy. In fact, they're showing themselves to be both stupid and impotent. The danger and disruption of Iran armed with nuclear weapons and ICBMs to deliver them would be much more a threat to Europe than the US, and the EU hasn't the power to ignore US sanctions without paying a heavy penalty -- their major businesses see this, and are acting accordingly. If the leftist idiots who control the EU bureaucracy and most of the member governments aren't driven from power, they will destroy Europe in their effort to transform it into something more to their liking.

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Emil M Friedman • Aug 8, 2018 at 11:39

Will a foreign company that does business in Iran be prohibited from doing business in the US or will it just be prohibited from doing business with the US government?

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JB Silver Emil M Friedman • Aug 8, 2018 at 16:12

It will be totally prohibited from doing ANY business in the USA, and also prohibited from using US currency to do business ANYWHERE in the world.And its US subsidiaries and directly owned and run branches (If we use McDonalds as an example, both branches directly owned by the foreign parent company and franchised branches owned by franchisees, would be liable for confiscation of assets, etc.).

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David • Aug 8, 2018 at 11:35

President Trump doesn't have any desire to hurt the people of Iran. His interest is in trying to stop the plans of such an evil government. And unfortunately, there will be a lot of collateral damage along the way. But one good thing that we are finally beginning to see is that the people of Iran are getting fed up with their leaders. Let's hope and pray that they never stop being fed up. The EU needs to get onboard with what President Trump is trying to accomplish.

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CeCelia Squires • Aug 8, 2018 at 11:02

The EU should explain where exactly will they get the billions necessary to carry out their plan to protect European companies from U.S. penalties! The EU continues to make bad decisions, their end can't happen soon enough!

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Maha • Aug 8, 2018 at 10:37

Are the unelected bureaucrats of the EU nothing but gutless, useful idiots? What is it about regimes that go completely against these liberals' basic values that appeal to them so much? Do the Mullahs reward all these bureaucrats with huge infusions of cash for their lack of fealty to their own interests? Or, perhaps Mogherini, et al are hoping they will still run things as they wear a burka in the Islamic Europe they are creating?

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David G • Aug 8, 2018 at 10:32

Federica Mogherini is a political hack, a Communist flunky of Obama.
Love the way the alleged holier-than-thou fake socialists ignore incentives, expecting companies to support the ever amorphous 'greater good' whilst giving up their own interest and even survival!It isn't even a 'greater good' because Iran is a bad actor and has a rogue regime intent on staying in and abusing its power. The "Iranian People" ? who are they bark ? the regime protectors
And the EU has admitted it is in it for the money, making them as capitalist as the openly capitalist firms it tries to control.Utter hypocrisy and Liberal thinking at its best.

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Terry Gain • Aug 8, 2018 at 10:24

First the Mullahs must be overthrown and then the Saudi Royal Family And then may Islam's influence recede in the ME and the West.

Who would have thought that the man to lead the charge against the spread of Islam is a man I accurately described as Rude, Crude and Lewd.

I am still kind, gentle and enlightened but I am 100% behind President Trump's efforts to generate progress in Muslim countries and make the world a better place for Muslims and safer for all us.

The woman is a total disgrace, like the Brussels Politburo who voted her in.

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Allan Leibler • Aug 8, 2018 at 08:11

This is regarded by the U.S Government as essential to its national security. The reaction of the Europeans whilst misguided and ineffective, may have further ramifications for the American attitude towards NATO.

I doubt very much whether the Europeans, who still can't shoot straight, will be saved a third time by the US should the Russians move a little westward! Mrs Mohgerini, who is openly hostile to both President Trump and Israel's PM Netanyahu, but publicly affectionate to the Iranian mullahs, should be replaced forthwith.

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Laura Allan Leibler • Aug 8, 2018 at 09:57

Allan, you are precisely correct. She's always been hostile to the US.

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Ruven Golan Allan Leibler • Aug 8, 2018 at 12:20

Maybe Mogherini got a good shutup from a Mullah

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Andrew Boughton • Aug 8, 2018 at 08:11

A well written and accurate analysis chronicling the beginning of the end.

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Jeff Page • Aug 8, 2018 at 06:28

This is the typical attack by the EU. If they don't like what others are doing then they are suddenly able to introduce new legislation that suits their agenda. The EU is terrified of upsetting Muslims no matter where they may be. What Donald Trump is doing is great! It really has given the unelected bureaucrats in the EU something to think about. Why Britain hasn't joined Trump amazes me, but then we also have a Muslim loving (terrified) leader who keeps telling us that Muslims are okay, Islam is a great religion, and other such rubbish!

There is also an ongoing fight about what the ex Foreign Office Minister Boris Johnson has written in a newspaper concerning Muslims in Britain. He referred to Muslim women as "letter boxes" when dressed head to foot in the seemingly obligatory Black uniform with just a slit for the eyes. He was quickly condemned for saying what the majority of British people would dearly like to say. But because of the threat of prosecution for "hate speech" very few express an opinion. If there were to be a poll, I think the majority would agree with Boris.

As is usual in Britain the Muslims come out in force to shut down any debate, and the media are quick to bring out "Baroness Warsi" an obnoxious Muslim woman who is always moaning about "Islamophobia" but is noticeably silent when it comes to condemning Muslim grooming gangs, as are the British media! I seriously hope that Boris Johnson refuses the demands for him to apologise, what he said is true and would be supported greatly by many people. The Prime Minister Theresa May also spoke up for Muslims. And why not? She has allowed the grooming of girls as young as 11 years of age to carry on, all in the name of "community cohesion" you understand. The PM is someone who would rather sacrifice young girls to be raped and abused just in case it upsets the poor sensitive Muslim communities across our country. Muslim communities that harbour terrorists and child grooming gangs.

Theresa May considers these communities an asset to our multicultural Britain. She still hasn't begun to realise that Muslims want to take control of Britain not become another part of it. Like most leaders in Europe, she has convinced herself that Muslims will make a contribution to society and live alongside others. No chance! The situation regarding sanctions and the EUs response is simply a petty attack on policy because the EU hasn't got the guts to oppose Islam on the European continent and is thereby terrified of applying sanctions to Iran themselves!

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Solomon Balas • Aug 8, 2018 at 06:15

Hubris; EU overrates its place in the world. Defanged and pitifully exposed, it is in no way wise to irritate USA with Putin in the war path mood he is in.

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Joseph • Aug 8, 2018 at 06:14

The last chance to save the Iranian economy is that President Hassan Rouhani open an embassy in Israel, of course ... Jerusalem!

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דוד ראובן Joseph • Aug 8, 2018 at 09:51

Sure. But ayatollah terrorists don't change their stripes. Only new leadership stands a chance of reforming Iran to the Persia of old.

New leadership. Dump terrorism. Destroy nuclear sites. Invest in the people. Rename Iran to Persia. Then formalize relations with Israel and embassy in Jerusalem, Israel.

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Larry M. Goldstein • Aug 8, 2018 at 05:56

The people who lead the EU run on delusion. They have convinced themselves that when they give commands, (1) the commands will be executed as ordered, and (2) the results will be as desired. Both conclusions are untrue.

Further, it is truly sad to observe the EU trying to maintain its international relevance at a time when the UK is leaving, the peoples of several other member countries wish to leave, the electorates are shifting to the right primarily due to the catastrophic third world migration, the rigidity of the euro is choking the Mediterranean countries while burdening Germany, and the EU members are scolded (properly) for refusing to invest even the bare minimum in their armed forces.

They say Nero fiddled while Rome burned. Here the EU flounders while the world burns. Europe was once great. Very sad. Larry M. Goldstein

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Gabor Ujvari • Aug 8, 2018 at 05:33

By undermining the legitimate US sanctions against Iran, the Europeans are committing national suicide. That is a bad option for the sake of making business with the enemy of mankind, Iran.

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Allan Leibler Gabor Ujvari • Aug 8, 2018 at 12:21

It's not suicide. It's an old European policy used in the 1930's-----it is called APPEASEMENT!

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